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  • 10.8.1-RISK AND THE RELATION TO TRADE CREDIT-TRADE CREDITS - DIFFERENT TYPES OF RISKS

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  • Trade credits - different types of risks

     
     
    Of course, all the risks mentioned in other Sections are present. How do you know that the goods are what they are said to be? When a bill of lading simply reads 'received one container said to contain (STC) 20 tons of green coffee, shipper's stow and count', where does that leave everyone?

    All forms of credit expose the lender to physical risk, price and value risk, and performance risk.

    Physical risk: the goods are simply not there, or are somehow lost. See 10.08.02.

    Price risk: the market value falls and the loss cannot be recovered, or the quality is not up to standard and so the value is less than expected. See 10.08.03.

    Performance risk: the foreign buyer does not buy the goods, reneges on the contract or is declared insolvent. See 10.08.06.

    See also:

    Differential risk or basis risk, 10.08.04.

    Currency risk, 10.08.05